The Gauhati High Court has clarified a critical distinction in railway law: that Section 106(3) of the Railways Act, 1989, which mandates a six-month notice for refund claims, applies only to overcharges - not to illegal or unauthorized collections. This ruling upholds the refund of Rs. 2,98,22,483 in siding charges paid by Numaligarh Refinery Ltd. to the Railways, setting a precedent for consignors facing similar unlawful levies.
Background & Facts
The Dispute
The dispute arose from the collection of siding charges by the North East Frontier Railway (NFR) from M/s Numaligarh Refinery Ltd. (NRL), a Government of India undertaking, for the carriage of petroleum products from Numaligarh Refinery Siding (NMGS) between April 2005 and July 2009. NRL paid freight and siding charges as demanded at the time of booking under 2,532 Railway Receipts. NRL contended that the Railway illegally levied both "through distance charges" (adding 9 km to the actual distance) and "siding charges" for the same service, resulting in double billing.
Key Facts
- NRL booked goods from NMGS to various destinations between April 2005 and July 2009
- Railway collected freight based on through distance (including 9 km) and additionally levied siding charges
- A joint meeting between NRL and NFR officials on 10.02.2001 first raised the issue of duplication in charges
- NRL submitted multiple reminders to NFR between 2001 and 2008
- NFR issued Clarification Letter No. C/402/RD/276/Pt.(Loose) dated 11.11.2008, stating that when rakes are pushed into sidings by reversing engines, through distance charges should not apply and only shunting charges should be levied
- NFR issued a second clarification letter dated 08.07.2009, confirming that siding charges would not be levied for consignments booked from NMGS during the relevant period
- CGS/NMGS issued a certificate dated 01.01.2013 certifying that Rs. 2,98,22,483/- was overcharged as siding charges
- CGS/NMGS, Sri Pradip Kumar Singh, reaffirmed this amount via RTI reply dated 27.03.2017, attaching Annexure-2
- NRL filed Claim Application No. OA-III-32/2016 before the Railway Claims Tribunal on 21.10.2016
- NRL claimed refund of Rs. 2,98,22,483/- with 12% interest from the date of payment
Procedural History
- 10.02.2001: First joint meeting between NRL and NFR officials raises issue of duplicate charges
- 11.11.2008: NFR issues clarification letter acknowledging error in charging through distance + siding
- 08.07.2009: NFR issues second clarification confirming siding charges not applicable
- 01.01.2013: CGS/NMGS issues certificate certifying Rs. 2,98,22,483/- as refundable siding charges
- 27.03.2017: CGS/NMGS confirms same amount via RTI reply with Annexure-2
- 21.10.2016: Claim Application No. OA-III-32/2016 filed before Railway Claims Tribunal
- 21.10.2016: Tribunal condones delay in filing claim (Misc. Appl. No. 17/2016)
- 30.11.2018: Railway Claims Tribunal allows claim, directs refund of Rs. 2,98,22,483/- with 6% interest from 21.10.2016 and 9% after 90 days
- 10.02.2026: Judgment reserved
- 24.03.2026: Judgment pronounced by Gauhati High Court
The Parties' Positions
Railways (Appellant in MFA 142/2019):
- Argued that Section 106(3) of the Railways Act, 1989 bars the claim due to non-compliance with the six-month notice requirement
- Contended that siding charges were lawful under Rule 2512 and Rule 2517 of IRCM Volume II
- Asserted that the 2008 and 2009 clarification letters were not binding and were superseded by Rates Circular No. 14/2009
- Claimed the CGS/NMGS certificate dated 07.01.2013 was not verifiable in official records
NRL (Respondent in MFA 142/2019; Appellant in MFA 82/2019):
- Argued that the charges were not overcharges but illegal collections, hence Section 106(3) does not apply
- Relied on Union of India v. West Coast Paper Mills Ltd. (AIR 2004 SC 3079) and Union of India v. Indian Oil Corporation Ltd. (2024 INSC 242)
- Submitted that the Railway’s own letters and certificates admitted illegality
- Contended that the delay in filing was excusable due to Railway’s own admission after 8 years
Relief Sought
NRL sought:
- Refund of Rs. 2,98,22,483/- paid as illegal siding charges
- Interest at 12% per annum from the date of last payment (28.03.2008)
- Reimbursement of application fee and legal practitioner’s fee
Railways sought:
- Dismissal of the claim on grounds of limitation under Section 106(3)
- Setting aside the Tribunal’s order on grounds of jurisdictional error and misapplication of law
The Legal Issue
The central question was whether Section 106(3) of the Railways Act, 1989, which requires a six-month notice for refund claims, applies to charges that are illegal from inception, or whether it is confined only to cases of overcharges - i.e., amounts paid in excess of legally prescribed rates.
Arguments Presented
For the Appellant (Railways)
The Railways contended that Section 106(3) is a mandatory statutory precondition for any refund claim, regardless of whether the charge is characterized as overcharge or illegal. They relied on Railway Board’s Memo No. TC-IV/2007/RP/1 dated 22.02.2010, which explicitly states that no claim shall be entertained without a timely notice under Section 106(3). They argued that the CGS/NMGS certificate dated 07.01.2013 was not authenticated in official records and could not override statutory provisions. Further, they asserted that Rule 2512 and Rule 2517 of the IRCM Volume II authorized the levy of siding charges, and therefore, the collection was lawful. The Railway also contended that the clarification letters dated 11.11.2008 and 08.07.2009 were administrative clarifications, not binding policy changes, and were superseded by Rates Circular No. 14/2009.
For the Respondent (NRL)
NRL argued that Section 106(3) applies only to "overcharges" as defined by the Supreme Court in West Coast Paper Mills and Indian Oil Corporation, i.e., amounts paid in excess of legally prescribed rates. They submitted that the siding charges in this case were not overcharges but entirely illegal, as the Railway had no legal basis to levy them simultaneously with through distance charges. They relied on the Supreme Court’s observation in Indian Oil Corporation that if a sum was not an overcharge at the time of payment, it cannot become one later due to subsequent policy changes. NRL emphasized that the Railway itself admitted the illegality through its own letters and certificates, thereby waiving the notice requirement by estoppel.
The Court's Analysis
The Court undertook a detailed analysis of the statutory language of Section 106(3) and the Supreme Court’s interpretation of the term "overcharge" in Union of India v. West Coast Paper Mills Ltd. and Union of India v. Indian Oil Corporation Ltd. The Court observed that the term "overcharge" is not a term of art but an ordinary English word meaning a charge in excess of that prescribed or permitted by law. Crucially, the Supreme Court in Indian Oil Corporation held that "Section 106(3) only applies when the claim is for a refund of an overcharge, for all other charges, be it illegal or not, the said provision will have no application whatsoever."
"If on the date when the payment was made, the sum in question was not an overcharge, it will not become an 'overcharge' due to intervention of subsequent events at least in terms of Section 106 of the Act, 1989."
The Court found that the Railway’s own letters dated 11.11.2008 and 08.07.2009, issued after internal review, confirmed that the levy of siding charges alongside through distance charges was contrary to established policy. The CGS/NMGS certificate dated 07.01.2013, corroborated by the RTI reply dated 27.03.2017, further substantiated that the charges were not merely excessive but unauthorized from the outset. The Court held that since the charges were illegal ab initio - i.e., never legally permissible - they could not be classified as "overcharges" under Section 106(3). Therefore, the six-month notice requirement was inapplicable.
The Court also rejected the Railway’s argument that the 2009 circulars superseded the clarification letters, noting that the letters were issued after the circulars and represented a specific admission of error in the context of NMGS. The Railway could not disown the acts of its own authorized officials. The Court further noted that the challenge to the order condoning delay dated 21.10.2016 was time-barred under Section 23(3) of the Railway Claims Tribunal Act, as no appeal was filed within 90 days.
Regarding the cross-appeal for enhanced interest, the Court affirmed the Tribunal’s discretion in awarding 6% interest from the date of filing and 9% after 90 days, citing its prior judgment in MFA 12/2009, which held that such interest was granted under inherent powers and could not be re-agitated absent perversity.
The Verdict
The Gauhati High Court dismissed both appeals. The Railways were directed to refund Rs. 2,98,22,483/- as illegally collected siding charges, with simple interest at 6% per annum from 21.10.2016 until the date of judgment, and at 9% per annum thereafter until full payment. The Court also upheld the Tribunal’s direction to pay the application fee of Rs. 1,51,578/- and legal practitioner’s fee of Rs. 3,000/-. The claim for 12% interest from 28.03.2008 was rejected. The parties were directed to bear their own costs.
What This Means For Similar Cases
Illegal Charges Are Exempt from Section 106(3) Notice
- Practitioners representing consignors must now distinguish between "overcharges" and "illegal charges" when filing refund claims
- If a charge was never legally authorized (e.g., double billing, unauthorized surcharges), Section 106(3) does not apply, and the six-month notice requirement is inapplicable
- Evidence of Railway’s own admission (letters, certificates, RTI replies) is critical to establish illegality
Documentary Evidence Trumps Official Record Denials
- A certificate issued by a Railway official (e.g., CGS/NMGS) and corroborated by RTI response creates a strong presumption of authenticity
- Mere assertion that documents "cannot be found" in records is insufficient to rebut such evidence
- Courts will rely on contemporaneous, official certifications over post-litigation denials
Railway Circulars Cannot Override Specific Admissions
- General circulars issued by Railway Board cannot override specific, case-specific admissions made by Railway officials
- Once a Railway authority admits illegality in writing, it cannot later invoke procedural bars to avoid liability
- This principle reinforces accountability in public utility services
